Wall Street

Fitch Says Outlook for Entire Residential Servicing Sector is 'Negative'

Posted on Thursday, November 11, 2010

Fitch Ratings has assigned a negative outlook to the entire U.S. residential mortgage servicer sector, citing increased concerns surrounding alleged procedural defects in the judicial foreclosure process.
A negative outlook from the agency signals that any rating change over the next two years will likely come in the form of a downgrade.
Diane Pendley is a managing director at Fitch and oversees the agency’s operational risk unit for U.S. residential mortgage-backed securities (RMBS). She says the robo-signing issues that have been uncovered pose several risks for the servicers involved, including additional costs and resources to research and remediate any errors, potential penalties, and flawed reputations.
But the damage goes beyond just those servicers at the center of the documentation mess. Fitch says it’s now an industry-wide issue that will place all servicers under increased scrutiny from state and federal regulators, state attorneys general, and the GSEs and other mortgage investors.
“All servicers will be affected, even those fully in compliance with all foreclosure rules and regulations,” Fitch said in its report. “This is due to the increased amount of time and manpower it will take to properly
address the much higher level of oversight and inquiries that are received, as well as the anticipated additional court delays.”
Fitch recently surveyed all of its rated servicers regarding their specific internal procedures used to verify and execute foreclosure affidavits. The agency says “all servicers have indicated that they are taking this matter seriously” and all have completed or are currently in the midst of reviewing their processes.
Approximately one-third of Fitch’s rated servicers have completed their reviews of foreclosure processes and the accuracy of their foreclosure affidavits. Fitch says these servicers do not believe they will need to take any corrective action or make any changes to their current procedures at this time.
Some servicers have estimated that they will be able to complete their review within the next several weeks, while others are still unable to give a specific estimate of how long it may take to complete their reviews.
However, “all servicers appear to be working towards quantifying and defining their position on foreclosures,” Pendley said.
Fitch expects all servicers will have substantially completed their internal reviews by the end of the fourth quarter. However, Pendley notes that final resolution of the foreclosure affidavit concerns and the multiple investigations that have been initiated “may not occur until well into 2011 and possibly beyond.”
JPMorgan Chase told analysts and investors at a presentation Thursday that it risks losing a couple million dollars each month foreclosure proceedings are delayed.
Fitch says based on the research its rated servicers have completed so far, all maintain the factual accuracy of their affidavits. However, some have found their procedures for reviewing, signing, and notarizing foreclosure documents may require changes and corrective actions.
By: Carrie Bay
DSNews.com


Supporting Materials

Comments

This shows real expertise. Thanks for the asnewr.

Forever 12/20/2011
1000 characters maximum Your Name:    

By Category

Recommended Sites